Wednesday, 9 May 2012

Moody's: Asian Liquidity Stress Index stabilises in April

KUALA LUMPUR (May 9): The Asian Liquidity Stress Index (Asian LSI) has stabilised to 15.3% in April after the downgrade to upgrade ratio moderated, according to Moody's Asia Liquidity Stress Index report.

in a statement on Wednesday, Laura Acres, a Moody's vice president and senior credit officer said that in April, the liquidity sub-index for Chinese speculative-grade companies stood at 15.6%, down from the high of 18.6% in March.

“While there was some improvement for the liquidity of Chinese property companies, it remains of note that almost one in four of such companies have weak liquidity," she said.

Moody’s said the index, which increases when speculative-grade liquidity appears to decrease, is near its highest level since October 2010.

However, it remains well below the high of 37% recorded in 4Q08 during the financial crisis, it said.

It stabilised to 15.3% in April compared to 15.5% in March, as the downgrade to upgrade ratio moderated with just one downgrade compared to one upgrade after three quarters of downgrades exceeding upgrades, it said.

In absolute terms, 15 of the 98 issuers in the speculative-grade portfolio demonstrated weak liquidity as at end April compared with 15 of 97 issuers in March.

"As such, a strong negative bias remains with almost 40% of the speculative-grade portfolio having a negative outlook or being on review for downgrade," Acres said.

Moody's still expects a moderate erosion of liquidity this year, as a tight credit supply in China flows through to the wider corporate space.

In 1Q12 in Asia, concerns about euro area sovereign debt and a more general economic slowdown seemed to ease as markets reopened and investors showed appetite for Asian risk.

However, more recently, a level of caution has prevailed and there remain several deals in the market yet to complete.